Oil fuels budget concerns

The price of oil has a number of officials looking into a future of uncertainty in the Cowboy State.

Oil, priced higher than $80 a barrel prior to November, has dropped steeply to price of $47.23 per barrel as of Wednesday morning. The significant drop in value has been reflected in lowered fuel prices and job cuts from many of the major oil and gas companies. Last week, Schlumberger announced it would be cutting 9,000 jobs worldwide, with Baker Hughes announcing 7,000 layoffs this week.

In Wyoming, much of the state’s budget is tied to the mineral extraction industry and oil values are causing concern amongst lawmakers. Speaking to journalists at the Wyoming Press Association’s annual winter convention, Gov. Matt Mead said every $5 drop in the price of oil results in a $35 million decrease in revenue to the state. The Consensus Revenue Estimating Group report, issued earlier this month, projects a reduction of $217.6 million for the 2015-2016 biennium from funding levels shown in its October 2014 report.

“As noted in the October 2014 report, exceptional increases in national oil production could have a severe dampening effect on the average price received for Wyoming oil. This over-supply scenario continues to dominate the market along with projections for tepid growth in the worldwide economy, giving cause to believe the supply glut will continue for an extended period of time,” the report states.

Rep. John Freeman (D-Green River) said the general attitude amongst legislators is caution, saying he hasn’t heard discussion of budget cuts, but expects new spending to be very limited. Freeman said while the state will take a financial hit, the state still has a strong revenue stream and reserves. Rep. Stan Blake (D-Green River) said oil’s impact on state revenues is alarming, but expects the state to weather the fiscal storm.

Mead said using the CREG report for fiscal planning isn’t the best way to plan state spending, calling for a transparent fiscal policy.

In Sweetwater County, oil is the second highest contributor to the county’s revenue.

“These are troubling economic times and we’ll have to wait and see where we end up,” Don Hartley, a representative of the Rock Springs Chamber of Commerce’s enterprise committee said. He said members of the committee is aware of how oil could effect Sweetwater County, but has not specifically discussed it.

Sweetwater County Assessor Pat Drinkle said oil’s taxable value last year was $483,910,078, while natural gas, the highest contributor, had a taxable value of $745,424,705. Drinkle said any impact the declined value of oil has on county revenues won’t be apparent until fiscal year 2016-2017, supposing it maintains its current price. Drinkle said the valuations are completed during the course of a calendar year, and since oil’s price didn’t start dropping until October, most of the valuation is based on higher prices.

“It’s not going to effect our value this year,” Drinkle said.

Drinkle said some groups, including Sweetwater County School District No. 1, have contacted her about the price of oil and its impact on local budgets. However not everyone is concerned about potential impacts caused by oil devaluation. County Commissioner Wally Johnson said the lower price of oil is in the best interest of the nation, saying the money people save on fuel will boost other areas of the economy.

 

Reader Comments(0)